2020 is a year many of us would wish to forget, not least because of the crippling economic and social fallout caused by Covid-19. While we all try to keep our families safe, it’s equally important to safeguard our credit scores. Jason Curtis explains.
Even if you are lucky enough not to be directly impacted by the pandemic, it is extremely important to understand that every financial action and transaction you make is tracked and recorded, resulting in what is commonly called a credit score – a number that is linked to your ID number.
WHO SCORES YOU, AND HOW?
‘There are four credit bureaus in South Africa,’ explains Pierre Louw, chartered accountant and director at Louw & Cronje Inc, ‘namely Experian, TransUnion, Compuscan and XDS. These credit agencies gather information about your credit history from various suppliers and consumer service vendors, organising the information to provide a “rating” of how likely a consumer is to fall behind/default on payments, and how the consumer weighs up against other consumers.’
WHAT’S A GOOD SCORE?
Your credit number (usually out of 1 000) represents how creditworthy you are to a bank or any other business from which you want credit or a loan. A high number – more than 600 out of 1000 – means you are creditworthy, which is good. A number below 400 is not, and means you might struggle to get credit.
WHAT DOES A LOW SCORE MEAN?
What many of us don’t realise is that a low credit score will not only affect your ability to get something as simple as a cellphone contract, but it could also impact your ability to get a job. Recruiters don’t only check your academic qualifications – many look at how you work with money too, as a way of rating your character and assessing your risk profile.
HOW TO FIND OUT YOUR SCORE…
You can go online to find out what your credit score is, ‘There are numerous credit report websites available, where you can get your credit score at no cost,’ says Pierre. A few are www.creditbureau.co.za, www.mycreditstatus.co.za and www.transunion.co.za.
… AND IMPROVE IT
Next, read through the report and respond to any negative information like late or non-payments. Then you need to make a plan to pay what’s owing, on time and in full.
OWN IT AND TAKE BACK CONTROL
Don’t run from or ignore your debt because you and your credit score will suffer. If you raise your hand and show you are aware of your commitments, it will serve you well. All credit providers are invested in getting back what is owed to them, and many will look to help you by tailoring a new repayment plan such as a payment holiday or by extending the term of repayment.
HAPPY CREDITORS = FINANCIAL FITNESS
To get your financial fitness back, you need to reduce the number of credit applications you make, and only apply for those you know you can comfortably afford. Remember, interest rates go up; and when they do, so do your instalments. The more responsible you are, the more positive your credit score and risk profile will be. It might sound simple, but it takes discipline and common sense, free of emotion, to keep your finances balanced and your creditors happy.
At the end of the day, a good credit score is not decided on how wealthy or poor we are, but rather how we work with and respect the money we have and what we owe.
COMMON DEBT TRAPS
Incurring debt to fund a lavish wedding, go on holiday or buy your significant other a gift beyond your normal means by using your credit card to fund it. Using a store card to fund that flashy new laptop you don’t really need.
Vanity and social pressure purchases, like trying to keep up with your neighbours or friends, when you don’t have the means.Swiping or tapping for that daily coffee or lunch, both of which could have been prepared at home. Smaller amounts, over time, stack up and balloon unnecessarily, all without us noticing until it’s too late
WHO SCORES YOU, AND HOW?
‘There are four credit bureaus in South Africa,’ explains Pierre Louw, chartered accountant and director at Louw & Cronje Inc, ‘namely Experian, TransUnion, Compuscan and XDS. These credit agencies gather information about your credit history from various suppliers and consumer service vendors, organising the information to provide a “rating” of how likely a consumer is to fall behind/default on payments, and how the consumer weighs up against other consumers.’
WHAT’S A GOOD SCORE?
Your credit number (usually out of 1 000) represents how creditworthy you are to a bank or any other business from which you want credit or a loan. A high number – more than 600 out of 1000 – means you are creditworthy, which is good. A number below 400 is not, and means you might struggle to get credit.
WHAT DOES A LOW SCORE MEAN?
What many of us don’t realise is that a low credit score will not only affect your ability to get something as simple as a cellphone contract, but it could also impact your ability to get a job. Recruiters don’t only check your academic qualifications – many look at how you work with money too, as a way of rating your character and assessing your risk profile.
HOW TO FIND OUT YOUR SCORE…
You can go online to find out what your credit score is, ‘There are numerous credit report websites available, where you can get your credit score at no cost,’ says Pierre. A few are www.creditbureau.co.za, www.mycreditstatus.co.za and www.transunion.co.za.
… AND IMPROVE IT
Next, read through the report and respond to any negative information like late or non-payments. Then you need to make a plan to pay what’s owing, on time and in full.
OWN IT AND TAKE BACK CONTROL
Don’t run from or ignore your debt because you and your credit score will suffer. If you raise your hand and show you are aware of your commitments, it will serve you well. All credit providers are invested in getting back what is owed to them, and many will look to help you by tailoring a new repayment plan such as a payment holiday or by extending the term of repayment.
HAPPY CREDITORS = FINANCIAL FITNESS
To get your financial fitness back, you need to reduce the number of credit applications you make, and only apply for those you know you can comfortably afford. Remember, interest rates go up; and when they do, so do your instalments. The more responsible you are, the more positive your credit score and risk profile will be. It might sound simple, but it takes discipline and common sense, free of emotion, to keep your finances balanced and your creditors happy.
At the end of the day, a good credit score is not decided on how wealthy or poor we are, but rather how we work with and respect the money we have and what we owe.
COMMON DEBT TRAPS
Incurring debt to fund a lavish wedding, go on holiday or buy your significant other a gift beyond your normal means by using your credit card to fund it. Using a store card to fund that flashy new laptop you don’t really need.
Vanity and social pressure purchases, like trying to keep up with your neighbours or friends, when you don’t have the means.Swiping or tapping for that daily coffee or lunch, both of which could have been prepared at home. Smaller amounts, over time, stack up and balloon unnecessarily, all without us noticing until it’s too late
DO YOU KNOW YOUR FINANCIAL STATUS?
Reviewed by Michelle Pienaar
on
December 22, 2020
Rating:
Reviewed by Michelle Pienaar
on
December 22, 2020
Rating:
